MILAN — Aeffe SpA swung to profit in 2014, lifted by strategic changes in design and organizational efficiency.

This story first appeared in the March 12, 2015 issue of WWD. Subscribe Today.

In the 12 months ended Dec. 31, the Italian fashion group recorded a net profit of 2.7 million euros, or $3.6 million, compared with a loss of 3.2 million euros, or $4.2 million, in 2013.

As reported last month, revenues last year inched up 0.2 percent to 251.5 million euros, or $334.5 million, compared with 251.1 million euros, or $331.4 million, in 2013, since Aeffe was affected by the end of the Jean Paul Gaultier and Cacharel licenses and a reorganization of the company’s Japanese distribution network, now managed exclusively through the wholesale channel. Net of these effects, sales would have increased 7.6 percent at constant exchange rates.

In 2014, earnings before interest, taxes, depreciation and amortization were up 24.7 percent to 25.7 million euros, or $34.2 million, compared with 20.6 million euros, or $27.2 million, in 2013, driven by the group’s rationalization and lower operating costs.

Operating profit doubled to 12 million euros, or $16 million, from 6 million euros, or $8 million, in 2013.

Massimo Ferretti, executive chairman, said 2014 “was a crucial year for the group, which has pursued a strategy conceived to enhance the portfolio’s brands. Choices implemented in the renewal of the stylistic offering, in organization and management efficiency have already given good results, which will be fully operational in the coming years.”

Aeffe controls the Alberta Ferretti, Moschino and Pollini brands, and produces and distributes collections for labels including Emanuel Ungaro, designed by Fausto Puglisi, and Cédric Charlier.

Tapping Jeremy Scott as creative director of Moschino and Alberta Ferretti’s focus on her namesake line are paying off, managing director and chief financial officer Marcello Tassinari told WWD. “Choices made at the end of 2013 positively impacted 2014, a year that cemented those decisions.” The executive said Moschino accounts for almost 60 percent of sales, and that the Alberta Ferretti brand is also growing.

He noted that the company is seeing “good prospects” from the arrival of Lorenzo Serafini at Philosophy, whose first collection for the brand launched last month.

Ferretti said “the return to profit of the group is definitely a confirmation and a further motivation to look to the future with optimism.”

Tassinari said there is “unexpressed potential” for the group’s brands to develop in both mature and emerging markets and through the growth of its accessories division.

In 2014, Aeffe’s ready-to-wear sales were down 2.4 percent to 192.1 million euros, or $255.5 million. Net of the effects caused by the changes in licenses and the reorganization in Japan, apparel revenues would have increased 7.3 percent at constant exchange rate.

Revenues of the footwear and leather goods division were up 19.5 percent to 86 million euros, or $114.4 million, before interdivisional eliminations.

Dollar amounts were converted at average exchange for the periods to which they refer.

In the year, sales in Italy rose 8.7 percent to 113.6 million euros, or $151 million, accounting for 45.1 percent of total revenues. Europe (Italy and Russia excluded) was up 11.6 percent to 55.8 million euros, or $74.2 million, representing 22.2 percent of sales, showing a recovery across all main markets.

Dented by its “difficult economic situation,” revenues in Russia decreased 14.1 percent to 16.6 million euros, or $22 million. “Russia is weak. The market is not so important for us, accounting for 6.6 percent of sales, yet not insignificant,” Tassinari said. “The region has slowed down and we’ve had to support clients with commercial operations, seeing slimmer margins. We are concerned also because there are less Russian tourists and this impacts retail sales, too.”

The U.S. was down 5.6 percent to 16.1 million euros, or $21.4 million, accounting for 6.4 percent of sales, a change mostly explained by the decrease in revenues related to the end of the licensing agreements mentioned above. Tassinari said the exchange rate will help business in the U.S. and was upbeat about sell-throughs in the region and an increase in doors and sales.

Japan was down 67.9 percent to 7 million euros, or $9.3 million, accounting for 2.8 percent of sales, as a consequence of the reorganization of the local distribution network, effective from the beginning of 2014. Under an exclusive distribution and franchise agreement with Woollen Co. Ltd. and Mitsubishi Corporation Fashion Co. Ltd., since the beginning of 2014, sales of the Alberta Ferretti, Philosophy and Moschino collections are exclusively wholesale. Like-for-like sales were up 6.7 percent in Japan, Tassinari said.

In the Rest of the World, revenues rose 10.9 percent to 42.3 million euros, or $56.2 million, representing 16.9 percent of total sales, boosted by a 25.8 percent jump in Greater China. “We are still small in China, which is performing very well, and this is an advantage at this moment, when many of our competitors are seeing a slowdown in the area,” Tassinari said.

There are plans to open 15 franchised stores this year between the Moschino and Alberta Ferretti labels in the Far East, he added.

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